Those keeping a close eye on mortgage rates in the UK will have noticed something of a pattern developing in the past week or two. Five year mortgage deals have been getting slightly more expensive in terms of the interest rates – something that has been seen at more than one provider.
Nationwide, Tesco, RBS and Santander have all raised the rates charged on their five year fixed deal mortgages, leading many homeowners to apply for the cheapest deals before their options run out. The increases may not seem that big – they range from a small 0.07% to a more significant 0.3% – but they still make a difference to the bottom line payment homeowners will make each month.
Preparing for interest rate rise
The reason for the change is down to lenders’ belief that interest rates set by the Bank of England will rise in the near future. Many experts are putting a date of next year on the rise, believing a change will occur soon after the next General Election. This is slated to happen in 2015.
While the Governor of the Bank of England, Mark Carney, has said there is no need for an immediate rate rise, he has not said when a rise could occur. However the expectation of future rises has been noted by the lenders, who are keen to put a rise in now.
This is common practice among lenders. They do not wait to see when an interest rate rise actually occurs. Instead they make sure they raise their own rates prior to an actual rate rise being announced. If homeowners remember this they can head off any rate rises by securing the best deal prior to any increases.
Furthermore, once one or two lenders put their rates up, everyone tends to follow suit in quick succession. This doesn’t leave long to secure a good rate.
Is this the best time to shop for a new mortgage?
Certainly many lenders are pointing to 2014 as the year of easier lending. Some experts suspect it may become more challenging to get a mortgage from 2015 onwards. This is particularly the case if the Bank of England did start making increases. Rates have been historically low for a long time now, but the economic recovery has led to plenty of speculation that they will have to start rising.
2014 therefore looks to be the best year to secure a cheap mortgage for a five year period. Anyone leaving it too late could find themselves struggling with higher payments from next year.
The main point to remember is to check the marketplace and see which lender has the best deal under the best terms. The best deal on the market at present has still gone up by around half a per cent, showing just how important it is to secure a deal before rates start increasing further. 2014 could be the best year to ensure your next five years’ worth of payments will be affordable.